PERFECT LINE, INC.



                                    $750,000


                       Secured Notes due February 2, 2005




                                ----------------
                       NOTE AND OPTION PURCHASE AGREEMENT

                                       AND

                               SECURITY AGREEMENT

                     (Minimum Purchase Per Investor $25,000)


                                ----------------




                             Dated February 2, 2004







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                               PERFECT LINE, INC.
                              5624 West 73rd Street
                             Indianapolis, IN 46278
                            Telephone: (317) 295-3500
                            Facsimile: (317) 298-8924



                       Secured Notes due February 2, 2005



                                                                February 2, 2004

To Each of the Purchasers Listed in
the Attached Schedule A:

Ladies and Gentlemen:

         Perfect  Line,  Inc., a  corporation  organized  under the laws of the
State of Indiana  (the  "Company"), agrees with you as follows and Interactive
Motorsports and Entertainment Corp., a corporation  organized under the
laws of the State of Indiana (the "Parent Company") agrees as provided in
Article 13:

ARTICLE 1.     AUTHORIZATION OF ISSUANCE OF NOTES.

         The Company has authorized the issue and sale of $750,000 in aggregate
principal amount of its Secured Notes due February 2, 2005 (such notes being
referred to herein as the "Notes"). The Notes shall be substantially in the form
set out in Exhibit 1, shall be in multiples of one thousand dollars ($1,000),
shall be for a minimum principal amount of twenty five thousand dollars
($25,000) and with such changes therefrom, if any, as may be approved by the
Purchasers and the Company. The Notes shall bear the legend set forth on the
form of Note set out in Exhibit 1 and shall include such other notations,
legends or endorsements as required by law. The terms and provisions contained
in the Notes shall constitute, and are hereby expressly made, a part of this
Agreement and, accordingly, the Company and the Purchasers, by their execution
and delivery of this Agreement, expressly agree to such terms and provisions and
to be bound thereby.

ARTICLE 2.     SALE AND PURCHASE OF NOTES AND OPTIONS TO PURCHASE COMMON SHARES.
         Subject to the terms and conditions of this Agreement, the Company
agrees to sell, and each Purchaser agrees, severally but not jointly, to
purchase from the Company, the aggregate principal amount of Notes set forth
opposite such Purchaser's name in Schedule A at a purchase price per Note equal
to 100% of the principal amount thereof. The obligations hereunder of each
Purchaser are several and not joint, and each of the Purchasers shall have no
obligation and no liability to any Person for the performance or nonperformance
hereunder by any other Purchaser

         In addition to issuance of the Note, each Purchaser shall receive an
Option to Purchase Common Shares (the "Option") of the Parent Company, in
substantially the form attached hereto as Exhibit 2. Each Option shall entitle

<PAGE>

the Purchaser to acquire the number of common shares of the Parent Company stock
equal to the amount of Notes purchased by such Purchaser divided by the fair
market value of the Parent Company common Stock on the date said Purchaser
executes this Agreement. The Option exercise price shall be the fair market
value of the Parent Company common Stock on the date said Purchaser executes
this Agreement. The option may be exercised, at the election of the holder of
the Option, by payment of the exercise consideration in cash or by delivery of
the Purchaser's Note (if said Note remains outstanding) to the Parent Company.
Each Option will expire March 1, 2005.

         The Company currently anticipates that it will survey the Option
Holders approximately ninety (90) days prior to the expiration of the Options to
determine the approximate number of investors that anticipate exercising their
respective Options. The Company contemplates that it will file a registration
statement with the Securities and Exchange Commission on the registration
statement form of its choosing, so that the Company will be in a position to
issue registered common shares upon the exercise of the Options by the Option
Holders. The Company further anticipates satisfying the registration
requirements of applicable state securities authorities in connection with the
issuance of the Option Shares. The Company has reached an agreement with an
affiliated person that if a minimum of Six Hundred Fifty Thousand Dollars
($650,000) in principal amount of Notes is not purchased in this offering, the
affiliated person will bear any and all expenses (including underwriting,
printing, legal and accounting expenses) reasonably necessary to accomplish such
registration of the Option Shares. In the event the Purchasers of an excess of
Six Hundred Fifty Thousand Dollars ($650,000) in principal amount of Notes is
purchased in this offering, the Company will bear those expenses. The Parent
Company will, in good faith, utilize its best efforts to file applicable
registration statements and take such other actions as may be required to effect
such registration. The parties acknowledge that the Parent Company may delay
such filing if the board of directors determines, in good faith, that the filing
of registration statement may have a material detrimental effect on the business
or prospects of the Parent Company by requiring the disclosure of material
non-public information at that time. Any such delay may not exceed sixty (60)
days from the receipt of notice by the Parent Company that the Option Holders
wish to exercise their demand registration rights. The Parent Company may not
have consecutive delays without the consent of the majority of the holders of
the Options Shares. This demand registration right must be exercised between the
expiration date of the Options (March 1, 2005) and April 1, 2005. After such
date not further demands will be available to the Option Share Holders.

ARTICLE 3.        CLOSING

         The sale and purchase of the Notes may occur in one or more closings,
each of which will occur at the principal offices of the Company on the date of
this Agreement (the "Closing or the "Closings") or on such other business day as
may be agreed upon by the Company and the Purchasers in writing. At the Closing
(or Closings), the Company will deliver to each of the Purchasers the Notes to
be purchased by such Purchaser in the form of a single Note dated the date of
the Closing (the "Closing Date or Closing Dates") and made payable to such
Purchaser against delivery by such Purchaser to the Company by wire transfer of
immediately available funds in the amount of the purchase price.

<PAGE>

ARTICLE 4.        REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants the following to each of the
Purchasers, as of the date hereof:

Section 4.1 Organization; Power and Authority. The Company is a corporation
validly existing under the laws of the State of Indiana. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts, to
execute and deliver this Agreement and the Notes and to perform the provisions
hereof and thereof.

Section 4.2 Authorization, etc. This Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

Section 4.3 Disclosure. Schedule 4.3 identifies all reports filed by the Parent
Company with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for its last
fiscal year and all reports filed by it for subsequent periods and events (such
reports, the "Parent SEC Reports"). The Parent SEC Reports (i) were prepared in
all material respects in accordance with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or in the Parent SEC Reports), and each fairly presents in
all material respects the consolidated financial position of the Parent Company
and its subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.

         Except as listed in the Schedule 4.3, since the date of the financial
statements contained in the most recent Parent SEC Report there has been no
event or occurrence relating to the Parent Company or its subsidiaries which, in
the reasonable judgment of the Company, after consultation with the Parent
Company, will be required to be disclosed in a Parent SEC Report on Form 8-K or
which would have a material adverse effect on the Parent Company and its
subsidiaries and which has not been disclosed to the Purchasers in a Schedule
hereto or in a Parent SEC Report on Form 8-K.

Section 4.4 Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will
not:

<PAGE>


(a)      violate, result in any breach of, or constitute a default under, or
         result in the creation of any lien in respect of any property of the
         Company under, (i) any indenture, loan or credit agreement to which the
         Company is bound or by which the Company or any of its properties may
         be bound, (ii) any lease, mortgage, deed of trust or other agreement or
         instrument to which the Company is bound or by which the Company or any
         of its properties may be bound, in each case that is material in
         relation to the business, operations, financial condition, assets, or
         properties of the Company and its subsidiaries taken as a whole
         ("Material") or (iii) the articles of incorporation or by-laws of the
         Company;

(b)      violate or result in a breach of any of the terms, conditions or
         provisions of any order, judgment, decree, or ruling of any court,
         arbitrator or Governmental Authority (as defined in Section 4.5) that
         is applicable and Material to the Company; or

(c)      violate any provision of any statute or other rule or regulation of any
         Governmental Authority that is applicable and Material to the Company.

Section 4.5 Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes. For purposes of this Agreement
"Governmental Authority" means the government of (a) the United States of
America or any state or other political subdivision thereof, or (b) any
jurisdiction in which the Company or any of its subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any properties of the
Company or any of its Subsidiary.

Section 4.6 Private Offering by the Company. Assuming the truth and correctness
of the representations and warranties of the Purchasers set forth in Article 5,
the sale of the Notes hereunder is exempt from the registration and prospectus
delivery requirements of the Securities Act.

Section 4.7 Use of Proceeds. The Company will apply the proceeds of the sale of
the Notes in accordance with Schedule 4.7.

Section 4.8 Satisfaction of Prior Debt. The debt and other obligations which
constituted the consideration supporting the Financing Statement on Form UCC-1
filed by Perfect Line Investments, LLC with the Indiana Secretary of State, on
June 21, 2001, as filing number 200100003493113 and which purports to place a
lien on certain assets of Perfect Line, LLC (a predecessor of the Company), have
been satisfied in full and no further debt or obligation exists in favor of
Perfect Line Investments, LLC.

ARTICLE 5.        REPRESENTATIONS AND COVENANTS OF THE PURCHASERS

         Each Purchaser (as to itself only) represents and warrants the
following to the Company:

Section 5.1 Purchase for Investment. Such Purchaser is purchasing the Notes and
the Option, and any Option Shares acquired upon exercise of the Option (unless
registered as currently anticipated) (the Notes, Options and Options Shares are
collectively, the "Securities") to be purchased by him/her/it solely for its own
account and not as nominee or agent for any other person and not with a view to,
or for offer or sale in connection with, any distribution thereof (within the
meaning of the Securities Act) that would be in violation of the securities laws
of the United States of America or any state thereof, without prejudice,

<PAGE>

however, to its right at all times to sell or otherwise dispose of all or any
part of said Securities pursuant to a registration statement under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act, and subject, nevertheless, to the disposition of its
property being at all times within its control.

Section 5.2 Accredited Investor. Such Purchaser is knowledgeable, sophisticated
and experienced in business and financial matters. Such Purchaser acknowledges
that the Securities, including any Option Shares acquired upon exercise of the
Option (unless registered as currently anticipated), have not been registered
under the Securities Act and understands that the Securities must be held
indefinitely unless they are subsequently registered under the Securities Act or
such sale is permitted pursuant to an available exemption from such registration
requirement; it is able to bear the economic risk of its investment in the
Securities and is presently able to afford the complete loss of such investment;
it is an Accredited Investor as defined in Rule 501(a) under Regulation D
promulgated by the Securities and Exchange Commission; and it has been afforded
access to information about the Company and its financial condition and business
sufficient to enable it to evaluate its investment in the Securities.

Section 5.3 Authorization. Such Purchaser has taken all actions necessary to
authorize it (a) to execute, deliver and perform all of its obligations under
this Agreement, (b) to perform all of its obligations under the Securities and
(c) to consummate the transactions contemplated hereby and thereby. This
Agreement is a legally valid and binding obligation of such Purchaser
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

Section 5.4 Restricted Securities. Each of the Purchasers and each subsequent
holder of any Securities by its acceptance thereof agrees that no transfer or
sale (including, without limitation, by pledge or hypothecation) of Securities
(or the Parent Company common stock acquired on exercise of the Option unless
registered as currently anticipated), by any holder of Securities which is
otherwise permitted hereunder, other than a transfer or sale to the Company,
shall be effective, unless such transfer or sale is made:

(a)      pursuant to an effective registration statement under the Securities
         Act and a valid qualification under applicable state securities or
         "blue sky" laws; or

(b)      without such registration or qualification as a result of the
         availability of an exemption therefrom and, if requested by the
         Company, counsel for such holder of Securities shall have furnished the
         Company with an opinion, satisfactory in form and substance to the
         Company, to the effect that no such registration is required because of
         the availability of an exemption from the registration requirements of
         the Securities Act.

ARTICLE 6.        PREPAYMENT OF THE NOTES

Section 6.1 Optional Prepayments. The Notes may not be prepaid for a period six
(6) months following the date of the issuance of the each Note. Following the
initial six (6) period non-prepayment period, the Company may, at its option,
prepay the principal amount of the Notes, in whole or in part, at any time and
from time to time, provided that the Company shall pay a premium of one percent
(1.0%) of any principal amount that is prepaid.

<PAGE>

Section 6.2 Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore prepaid.

Section 6.3 Maturity; Surrender, etc. In the case of each prepayment of Notes
pursuant to this Article 6, the principal amount of each Note to be prepaid
shall mature and become due and payable on the date fixed for such prepayment,
together with: (i) interest on such principal amount accrued to such date and
(ii) the prepayment premium on such principal amount in accordance with Section
6.1 of this Agreement. From and after such date, unless the Company shall fail
to pay such principal amount when so due and payable, together with the interest
and premium, as aforesaid, interest on such principal amount shall cease to
accrue. Any Note paid or prepaid in full shall be surrendered to the Company and
cancelled and shall not be reissued, and no Note shall be issued in lieu of any
prepaid principal amount of any Note.

ARTICLE 7.        EVENTS OF DEFAULT

         An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:

(a)      the Company defaults in the payment of principal, on any Note when the
         same becomes due and payable, whether at maturity or at a date fixed
         for prepayment or by declaration or otherwise; or

(b)      the Company  defaults in the payment of any interest on any Note for
         more than 10 business  days after the same becomes due and payable; or

(c)      the Company defaults in the performance of or compliance with any term
         contained herein (other than those referred to in paragraphs (a) and
         (b) of this Article 7) and such default is not remedied within 60 days
         after the earlier of (i) the Chief Executive Officer or Chief Financial
         Officer obtaining actual knowledge of such default and (ii) the Company
         receiving written notice of such default from any holder of a Note (any
         such written notice to be identified as a "notice of default" and to
         refer specifically to this paragraph (c) of Article 7); or

(d)      any representation or warranty made by the Company in Article 4 or
         Section 9.2 of this Agreement proves to have been false in any material
         respect on the Closing Date(s) and the fact that such representation or
         warranty was false on the Closing Date(s) could reasonably be expected
         to have a material adverse effect on the ability of the Company to
         perform its obligations under this Agreement and the Notes; or

(e)      the Company (i) files, or consents by answer or otherwise to the filing
         against it of, a petition for relief or reorganization or arrangement
         or any other petition in bankruptcy, for liquidation or to take
         advantage of any bankruptcy, insolvency, reorganization, moratorium or
         other similar law of any jurisdiction, (ii) makes an assignment for the
         benefit of its creditors, (iii) consents to the appointment of a
         custodian, receiver, trustee or other officer with similar powers with
         respect to it or with respect to any substantial part of its property,
         (iv) is adjudicated as insolvent or to be liquidated, or (v) takes
         corporate action for the purpose of any of the foregoing; or
<PAGE>

(f)      a court or Governmental Authority of competent jurisdiction enters an
         order appointing, without consent by the Company, a custodian,
         receiver, trustee or other officer with similar powers with respect to
         it or with respect to any substantial part of its property, or
         constituting an order for relief or approving a petition for relief or
         reorganization or any other petition in bankruptcy or for liquidation
         or to take advantage of any bankruptcy or insolvency law of any
         jurisdiction, or ordering the dissolution, winding-up or liquidation of
         the Company, or any such petition shall be filed against the Company
         and such petition shall not be dismissed within 60 days.

ARTICLE 8.        REMEDIES ON DEFAULT, ETC.

Section 8.1       Acceleration.

(a)      If an Event of Default with respect to the Company described in
         paragraph (e) or (f) of Article 7 has occurred, all the Notes then
         outstanding shall automatically become immediately due and payable.

(b)      If any other Event of Default has occurred and is continuing, any
         holder or holders of a majority in principal amount of the Notes at the
         time outstanding may at any time at its or their option, by notice or
         notices to the Company, declare all the Notes then outstanding to be
         immediately due and payable.

(c)      If any Event of Default described in paragraph (a) or (b) of Article 7
         has occurred and is continuing, any holder or holders of Notes at the
         time outstanding affected by such Event of Default may at any time, at
         its or their option, by notice or notices to the Company, declare all
         the Notes held by it or them to be immediately due and payable.

         Upon any Notes becoming due and payable under this Section 8.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus all accrued and unpaid interest
thereon, shall all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of which are hereby
waived.

Section 8.2 Security. The obligations of the Company to the Purchasers under the
Notes are secured by a grant of a security interest in certain assets of the
Company as more fully set forth in Article 9. As a result, Purchasers shall have
the rights and remedies of a secured creditor with respect to certain assets as
more fully set forth in Article 9. Additionally and as further security for the
Notes, the Parent Company will guarantee the Company's obligations under the
Notes and this Agreement.

Section 8.3 Other Remedies. Subject to certain limitations set forth in Section
9.7(f) with respect to the exercise of remedies with respect to the Collateral
(as defined in Section 9.1), if any Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 8.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.

<PAGE>

Section 8.4 Rescission. At any time after any Notes have been declared due and
payable pursuant to clause (b) or (c) of Section 8.1, the holders of not less
than a majority in aggregate principal amount of the Notes then outstanding, by
written notice to the Company, may rescind and annul any such declaration and
its consequences. No rescission and annulment under this Section 8.4 will extend
to or affect any subsequent Event of Default or impair any right consequent
thereon.

Section 8.5 No Waivers or Election of Remedies, Expenses, etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company will pay to
the holder of each Note on demand such further amount as shall be sufficient to
cover all reasonable costs and expenses of such holder incurred in any
enforcement or collection under this Article 8, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

ARTICLE 9.        GRANT OF SECURITY INTEREST AND LICENSE TO USE SOFTWARE

Section 9.1 Security Interest in Collateral. As security for the payment and
performance of all obligations of the Company to the Purchasers under the Notes
and this Agreement and all modifications, substitutions, renewals and extensions
of any such obligations, together with interest at the rates provided in the
Notes and costs of collection and attorneys' fees and without relief from
valuation and appraisement laws (collectively, the "Liabilities"), the
Purchasers shall have, and the Company does hereby grant to the Purchasers, a
security interest in the following items of personal property (collectively, the
"Collateral"):

(a)      The Company's simulators specified on Schedule 9.1(a), whether now
         owned or hereafter acquired, specifically including, without
         limitation, improvements, accessories, attachments, and parts thereto;
         and

(b)      All products and proceeds of each of the foregoing,  specifically
         including,  without limitation,  (i) any and all proceeds of any
         insurance,  indemnity,  warranty or guaranty  payable to the Company
         from time to time,  (ii) any and all payments of any form  whatsoever
         made or due and payable to the Company from time to time in connection
         with any requisition,  confiscation,  condemnation,  seizure or
         forfeiture of all or any part of the  foregoing by any  Governmental
         Authority  or any person or entity  acting under color of Governmental
         Authority,  (iii) to the extent of the value of Collateral, claims
         arising out of the loss, nonconformity,  or  interference  with the use
         of, defects or infringement of rights in, or damage to, the Collateral,
         and (iv) any and all other  amounts from time to time paid or payable
         under or in connection with any of the foregoing, whether or not in
         lieu thereof.

Section 9.2 Representations and Warranties with respect to the Collateral. The
Company represents and warrants to the Purchasers that:

(a)      The exact corporate name of the Company and its state of incorporation
         are each correctly stated in the preamble to this Agreement.
<PAGE>

(b)      All Collateral is lawfully owned by the Company,  free and clear of any
         prior security  interest,  pledge, sale,  assignment,  transfer or
         other  encumbrance  other than Permitted  Encumbrances (as defined
         below); the Company has the unencumbered  right to pledge,  sell,
         assign or transfer the Collateral subject to the Permitted Encumbrances
         and to subject the Collateral to the security  interest in favor of the
         Purchasers herein;  except in respect of Permitted  Encumbrances,  no
         financing statement covering all or any portion of the  Collateral  is
         on file in any  public  office  other  than in  favor  of the
         Purchasers;  and the security  interest  herein  constitutes  a legal
         and  valid,  first  priority  security  interest  in the Collateral.

(c)      Schedule 9.1(a) is a true and correct address for the location of the
         simulators that are subject to the security interest.

(d)      For purposes of this Article 9, "Permitted Encumbrance" means

(e)      liens for taxes and assessments or governmental charges or levies and
         liens securing claims or demands of carriers, warehousemen, mechanics,
         material men, landlords, repairmen or other like liens;

        (i)       other liens incidental to the normal conduct of the business
                  of the Company or any subsidiary or the ownership of its
                  property which are not incurred in connection with the
                  incurrence of indebtedness and which do not, in the aggregate,
                  materially impair the use of such property in the operation of
                  the business of the Company and its subsidiaries taken as a
                  whole or the value of such property for the purposes of such
                  business; and

        (ii)      liens securing the Notes.

(f)      None of the Collateral is attached to real estate so as to constitute a
         fixture.

Section 9.3       Agreements Concerning Collateral.

(a)      Except with prior written notice to the Purchasers, the simulators will
         be kept at the locations set forth on Schedule 9.1(a) hereto.

(b)      The Company will keep the Collateral in good order and repair, ordinary
         wear and tear excepted, and will not waste or destroy the Collateral or
         any portion thereof, except in the case of obsolete Collateral which is
         no longer used or useful in Company's business.

(c)      Company may from time to time substitute Collateral, provided that the
         substituted Collateral is not subject to any lien or other encumbrance
         (other than Permitted Encumbrances) and has a fair market value at
         least equal to the fair market of the Collateral for which it is
         substituted.

(d)      The Company shall not permit any item of Collateral to become a fixture
         to real estate or an accession to any other property not subject to the
         Purchasers' security interest herein without the prior written consent
         of the Purchasers.

Section 9.4       General Provisions Concerning Collateral.

(a)      All Collateral acquired after the date hereof will be acquired by the
         Company free of any lien, security interest or encumbrance, except
         Permitted Encumbrances.
<PAGE>

(b)      The Company agrees to do such  reasonable  acts and things and deliver
         or cause to be delivered such other documents as the  Purchasers  may
         deem  necessary to establish and maintain a valid  security  interest
         in the Collateral  (free of all other liens and claims except
         Permitted  Encumbrances) to secure the payment and  performance  of the
         Notes and to defend  title to the  Collateral  against  any person
         claiming  any interest  therein adverse to the  Purchasers.  The
         Company  authorizes the  Purchasers,  at the expense of the  Company,
         to execute and file a  financing  statement  or  statements  on its
         behalf in those  public offices  deemed  advisable  or  necessary  by
         the  Purchasers  to protect the  security  interests  of the
         Purchasers herein granted.

Section 9.5       Insurance.

(a)      The Company shall have and maintain at all times, with respect to
         Collateral, insurance written by companies acceptable to the Purchasers
         covering risks customarily insured against by companies engaged in
         business similar to that of the Company in reasonable amounts,
         containing such terms, in such form, and for such periods customarily
         maintained by companies engaged in business similar to that of the
         Company. Such insurance shall be payable to the Company and the
         Purchasers as their interests may appear.

(b)      All such  insurance  policies shall carry  standard,  non-contributory
         lender's loss payable  clauses and endorsements in favor of the
         Purchasers.  The insurance  certificates  evidencing the Company's
         compliance with the above shall be  deposited  with the  Purchasers,
         and in the event the Company fails to file and maintain such insurance,
         the Purchasers may, at its option,  purchase such insurance and the
         cost of such insurance  shall become a Liability  secured by these
         presents and all sums expended  shall bear interest at the rate of
         interest set forth in the Notes until paid.  The Company shall pay all
         insurance  premiums promptly  when due. The Company  hereby  assigns to
         the Purchasers  the  proceeds of all such  insurance, including,
         without limitation,  any premium refunds,  to the extent of the
         Liabilities,  shall direct the insurer to make payment of any losses or
         refunds  directly to the Purchasers,  and appoints the Purchasers its
         attorney-in-fact to endorse any draft, check or other form of payment
         made by such insurer.

Section 9.6 Purchasers May Defend Title. In the event the Company fails to pay
any taxes, assessments, premiums, or fees, or fails to discharge any liens or
claims against the Collateral required to be paid or discharged by the Company,
or fails to purchase, maintain and file with the Purchasers any insurance
required by this Agreement, or if any such insurance is inappropriate to the
situation, in the Purchasers's reasonable discretion, the Purchasers may,
without demand or notice, pay any such taxes, assessments, premiums or fees, or
pay, acquire, satisfy or discharge any liens or claims asserted against the
Collateral (without any obligation to determine the validity thereof), or
purchase any such insurance. All sums so expended by the Purchasers shall become
a Liability secured by these presents and shall bear interest at the rate of
interest set forth in the Notes until paid.

Section 9.7       Remedies.

(a)      Upon the occurrence  and during the  continuation  of any Event of
         Default and subject to compliance  with Section  9.7(f)  below,  the
         Purchasers  shall have,  in addition to all other rights and  remedies,
         the remedies of a secured party under the Indiana  Uniform  Commercial

<PAGE>

         Code  (regardless  of whether the Code has  been  enacted  in the
         jurisdiction  where  rights  or  remedies  are  asserted)  including,
         without limitation,  the right to take possession of the  Collateral,
         and for that purpose the Purchasers may, so far as the Company can give
         authority  therefor,  enter upon any premises on which the  Collateral
         may be situated  and remove  the same  therefrom.  The  Purchasers
         shall  give to the  Company at least ten (10) days' prior  written
         notice of the time and place of any public sale of  Collateral  or of
         the time after which any private sale or any other intended disposition
         is to be made.  The Company hereby irrevocably appoints the Purchasers
         and   Purchasers'  designees  from  time to  time its  true and lawful
         attorneys-in-fact,  with full power of  substitution  in the premises
         upon the  occurrence  and during the continuance of an Event of Default
         (i) to demand, collect,  receipt for, settle,  compromise,  adjust, sue
         for,  foreclose or realize upon the Collateral in such manner as the
         Purchasers  may determine;  and (ii) to do all things  necessary  to
         carry out this  Article 9 of the  Agreement.  Subject to  compliance
         with Section 9.7(f),  the Company hereby ratifies and approves all acts
         of such attorneys.  Neither  Purchasers nor any  attorney  will be
         liable for any acts or  omissions  nor for any error of  judgment or
         mistake of fact or law, absent gross  negligence,  bad faith or willful
         misconduct.  This power,  being coupled with an interest, is
         irrevocable until the Liabilities have been fully satisfied.

(b)      Except as otherwise  expressly  set forth  herein,  Company  waives
         demand,  notice,  protest,  notice of acceptance of this Agreement,
         notice of loans made, credit extended,  Collateral received or
         delivered or other  action  taken in  reliance  hereon  and all other
         demands  and  notices of any  description.  With respect to both
         Liabilities and  Collateral,  the Company assents to any extension or
         postponement of the time of payment or any other indulgence,  to any
         substitution,  exchange, or release of Collateral, to the addition or
         release of any party or person primarily or secondarily  liable, to the
         acceptance of partial payments  thereon and the settlement, compromise
         or adjustment of any thereof,  all in such manner and at such time or
         times as the  Purchasers  may deem  advisable.  The  Purchasers  shall
         have no duty as to the collection or protection of the  Collateral, or
         any income  therefrom,  nor as to the  preservation  of rights  against
         prior parties nor as the  preservation  of any rights  pertaining
         thereto beyond the safe custody  thereof.  The Purchasers may exercise
         their rights with respect to Collateral  without  resorting or regard
         to other  Collateral or sources of  reimbursement  for any Liability.
         The Purchasers  shall not be deemed to have waived any of these rights
         as to or under  Liabilities or Collateral  unless such waiver be in
         writing  and  signed by the  Purchasers.  No delay or  omission  on the
         part of the  Purchasers  in exercising  any right  shall  operate  as a
         waiver of such right or any other  right.  A waiver on any one occasion
         shall not be  construed  as a bar to the  exercise  of any  right on
         any  future  occasion.  All rights and remedies of the  Purchasers  as
         to or under the  Liabilities  or Collateral  whether  evidenced hereby
         or by  any  other  instrument  or  papers  shall  be  cumulative  and
         may  be  exercised  singly, successively  or  together.  The
         Purchasers  may,  from time to time,  without  notice to the Company
         (a) retain or obtain a security  interest in any property of any other
         person,  in addition to the Collateral, to secure any of the
         Liabilities;  (b) retain or obtain the primary or  secondary  liability
         of any party or parties,  in addition to the Company  with respect to
         any of the  Liabilities;  (c) extend or renew for any period  (whether
         or not longer than the original  period) or release or  compromise  any
         liability of any party or parties  primarily  or  secondarily  liable
         to the  Purchasers  under the  Agreements  or the Notes;  (d) release
         its security  interest in any of the  property  securing  any of the
         Liabilities  and permit any  substitution or exchange for any such
<PAGE>
         property;  and (e) subject to Section 9.7(f),  resort to the Collateral
         for the payment of any of the  Liabilities  whether or not it shall
         have  resorted to any other property or shall have proceeded  against
         any party  primarily or secondarily  liable for any of the Liabilities.

(c)      The Company shall pay to the Purchasers on demand any and all
         reasonable  expenses,  including  reasonable attorneys' fees,  incurred
         or paid by the Purchasers in protecting or enforcing its rights as to
         or under the  Liabilities or the Collateral.  After deducting all of
         such expenses,  the residue of any proceeds of collection  or sale of
         the  Collateral  shall be  applied to the  payment  of  principal  or
         interest  on Liabilities in such order of preference as the Purchasers
         may  determine,  proper  allowance for interest on  Liabilities  not
         then due being made,  and any excess shall be returned to the Company.
         To the extent that Company  makes a payment or payments to the
         Purchasers or the  Purchasers  enforces  their  security interest and
         lien, and such payments or the Proceeds of such  enforcement  are set-
         off or any part thereof are subsequently invalidated,  declared to be
         fraudulent or preferential,  set aside and/or required to be repaid to
         a trustee or  receiver  or any other  party  under any  insolvency law,
         state or federal  law, common law or  equitable  cause,  then to the
         extent of such  recovery,  the  liability  or part  thereof
         originally  intended to be  satisfied  shall be revived and  continued
         in full force and effect as if such payment  had not been made or such
         enforcement  or  set-off  had not  occurred  and shall be  Liabilities
         secured  by the  Collateral.  The  Purchasers  may,  at any  time or
         times,  pay,  acquire,  satisfy,  or discharge  any  security interest,
         lien,  encumbrance  or  claim  asserted  by any  person  against  the
         Collateral.  The  Purchasers  shall have no obligation to determine the
         validity  thereof.  All sums paid by the  Purchasers  under the
         provisions of this  paragraph  and any existing or other  charges
         relating thereto  shall be repaid to the  Purchasers  by  Company  on
         demand,  shall be deemed an  advance  to the Company and shall bear
         interest at the rate of interest provided in the Notes.

(d)      If, at any time after payment in full of all Liabilities and
         termination of the Purchasers' security interest, any payments on the
         Liabilities previously made by the Company or any other Person must be
         disgorged by the Purchasers for any reason whatsoever, including,
         without limitation, the insolvency, bankruptcy or reorganization of the
         Company or such Person, this Agreement and the Purchasers' security
         interests herein shall be reinstated as to all disgorged payments as
         though such payments had not been made, and the Company shall sign and
         deliver to the Purchasers all documents, and shall do such other acts
         and things, as may be necessary to re-perfect the Purchasers' security
         interest.

(e)      The Company, on its own behalf and on behalf of its successors and
         assigns, hereby expressly waives all rights, if any, to require a
         marshaling of assets by the Purchasers or to require the Purchasers'
         first resort to some or any portion of the Collateral before
         foreclosing upon, selling or otherwise realizing on any other portion
         thereof.

(f)      Notwithstanding anything in this Section 9.7 to the contrary no action
         may be taken by the Purchasers pursuant to this Article 9, unless
         agreed to in writing by Purchasers holding a majority of the aggregate
         outstanding principal amount of the Notes with a copy of such written
         agreement delivered to the Company prior to the taking of any such
         action.
<PAGE>

Section 9.8       Grant of License to Use Software.

(a)      The Company hereby grants each of the Purchasers a worldwide,  royalty
         free,  non-exclusive license to use the Company's  proprietary software
         that is loaded into the  simulators  that  constitute  the Collateral
         (collectively,  the "Software") in event the Purchasers  exercise their
         rights as secured creditors of the Company  pursuant to Section 9.7
         with respect to the  Collateral.  The Software  may only be used by th
         Purchasers  in  conjunction with the Collateral  n which the Software
         has been loaded by the Company. Purchaser may not transfer or assign
         the Software to any person  except in  connection  with a sale of the
         Collateral  pursuant to the  exercise of their  remedies  nder  Section
         9.7,  and any person to whom the Software  is  assigned  in that manner
         must enter into an  agreement,  as a  condition  to the  transfer,
         whereby  they accept the terms of this  License.  Each  Purchaser
         agrees that it shall not, and shall not permit any person to alter,
         modify or adapt the  Software  in any manner  including,  but not
         limited to, translating,  decompiling,  disassembling or attempting to
         create  derivative works. Each Purchaser agrees that it shall not, and
         shall not permit any other  person to,  attempt to reverse engineer the
         Software. This license and a Purchaser's  right to use the Software as
         provided herein  automatically  terminates if such Purchaser fails to
         comply with any of the foregoing provisions.

(b)      The Company retains all rights not expressly granted and nothing in
         this Section 9.9 constitutes a waiver of the Company's rights under the
         United States copyright laws or any other federal or state law.

(c)      The Software is licensed to the Purchasers "AS IS" and the Company
         makes no warranty as to the functionality of the Software.

(d)      In no event will the Company be liable for direct, indirect, special,
         incidental or consequential damages arising out of the use of, or
         inability to use, the Software, even if advised of the possibility of
         such damages.

(e)      All rights and licenses granted under or pursuant to this Section 9.9
         by the Company to the Purchasers are, and shall otherwise be deemed to
         be, for the purposes of Section 365(n) of the United States Bankruptcy
         Code (the "Bankruptcy Code"), "licenses or rights to intellectual
         property" as defined under Section 101(52) of the Bankruptcy Code.

ARTICLE 10.       SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

         All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by a Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. This Agreement and the Notes embody the
entire agreement and understanding between the Purchasers listed on the
signature page hereto, the Company and the Parent Company and supersede all
prior agreements and understandings relating to the subject matter hereof.

<PAGE>

ARTICLE 11.       AMENDMENT AND WAIVER

Section 11.1 Requirements. This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the holders of a majority of the outstanding principal amount of the
Notes, except that no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (a) subject
to the provisions of Article 8 relating to acceleration or rescission, change
the amount or time of any prepayment or payment of principal of, or reduce the
rate or change the time of payment or method of computation of interest on the
Notes, or (b) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver or (c)
amend Sections 7(a), 7(b), or Articles 8, 9 or 11.

Section 11.2 Binding Effect, etc. Any amendment or waiver consented to as
provided in this Article 11 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.

ARTICLE 12.       NOTICES

         All notices and communications provided for hereunder shall be in
writing and sent (a) by hand delivery, or (b) by telecopy, or (c) by registered
or certified mail with return receipt requested (postage prepaid), or (d) by a
recognized overnight delivery service (with charges prepaid). Any such notice
must be sent:

        (i)       if to a Purchaser, to the Purchaser at the address specified
                  on Schedule A, or at such other address as the Purchaser shall
                  have specified to the Company in writing,

        (ii)      if to any other holder of any Note, to such holder at such
                  address as such other holder shall have specified to the
                  Company in writing, or

        (iii)     if to the Company, to the Company at its address set forth on
                  page 1 of this Agreement to the attention of Chief Financial
                  Officer, or at such other address as the Company shall have
                  specified to the holder of each Note in writing, and in any
                  event, with a copy (which shall not constitute notice) to Bose
                  McKinney & Evans LLP, 2700 First Indiana Plaza, 135 N.
                  Pennsylvania Street, Indianapolis, IN 46204, Attention:
                  Jeffrey B. Bailey.

         Notices delivered by personal delivery or telecopy will be deemed given
when actually received. Notices delivered by registered or certified mail shall
be deemed delivered four (4) business days after being sent. Notices delivered
by overnight delivery service shall be deemed delivered the next business day
after being sent.

<PAGE>

ARTICLE 13.       MISCELLANEOUS

Section 13.1 Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.

Section 13.2 Payments Due on Non-Business Days. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a business day shall be
made on the next succeeding business day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
business day.

Section 13.3 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

Section 13.4 Construction. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any person, or which such person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
person.

Section 13.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.

Section 13.6 No Personal Liability. No director, officer, employee,
incorporator, member or shareholder of the Company, the Parent Company or any
subsidiary of the Company will have any liability for any obligations of the
Company, the Parent Company or any subsidiary of the Company under the Notes or
this Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of a Note by accepting such Note
waives and releases all such liability. The waiver and release will be part of
the consideration for issuance of the Notes.

Section 13.7 Governing Law. THIS AGREEMENT, THE NOTES AND ALL ISSUES HEREUNDER
AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF INDIANA (WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW).

         If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.


                                   Very truly yours,

                                   PERFECT LINE, INC.


                                   By: /s/ William R. Donaldson
                                       William R. Donaldson
                                       Chairman and Chief Executive Officer


                                    INTERACTIVE MOTORSPORTS AND
                                    ENTERTAINMENT CORP.


                                    By: /s/ William R. Donaldson
                                        William R. Donaldson
                                        Chairman and Chief Executive Officer

                            CORPORATE ACKNOWLEDGEMENT


STATE OF INDIANA  )
                  ) SS:
COUNTY OF MARION  )

         On this ___ day of _________, 2004, before me, the undersigned officer,
personally appeared William R. Donaldson, known personally to me to be the
Chairman and Chief Executive Officer of each of the above-named corporations and
acknowledged that he, as an officer of each of the above-named corporations and
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing the name of each of the above-named corporations
by himself as an officer of each of the above-named corporation.

         Witness my hand and notarial seal this ____ day of ___________, 2004.


My Commission Expires:

------------------------------      ------------------------------------------
                                     Notary Public
My County of Residence:

------------------------------      -----------------------------------------
                                    Printed Name


<PAGE>


                           COUNTERPART SIGNATURE PAGE




By :
    ----------------------------------------





By:
   -----------------------------------------




--------------------------------------------




--------------------------------------------

<PAGE>

                                   Schedule A

                                   Purchasers



Name and address                                              Amount


<PAGE>


                                  Schedule 4.3

                           Parent Company SEC Reports

Form                       Date Filed                     Period Ending
10-QSB                     November 20, 2003              September 30, 2003
8-K                        October 13, 2003               October 13, 2003
10-QSB                     August 19, 2003                June 30, 2003
8-K                        June 20, 2003                  June 20, 2003
10-QSB                     May 20, 2003                   March 31, 2003
10-KSB                     April 15, 2003                 December 31, 2002
8-K                        March 13, 2003                 March 13, 2003
S-8                        February 13, 2003              February 13, 2003
8-K                        January 6, 2003                January 6, 2003
10-QSB                     November 14, 2002              September 30, 2002
8-K/A                      October 1, 2002                August 2, 2002
8-K                        September 19, 2002             September 17, 2002
10-QSB                     August 19, 2002                June 30, 2002
NT 10-Q                    August 14, 2002                June 30, 2002
8-K                        August 14, 2002                August 2, 2002
10-QSB                     April 30, 2002                 March 31, 2002
10-KSB                     March 29, 2002                 December 31, 2001



<PAGE>

                                  Schedule 4.7

                                 Use of Proceeds

Interactive Motorsports and Entertainment Corp.
$750,000  Loan - Use of Proceeds
As of February 2, 2004
Total Source of Funds:

   Loan                                                                $ 750,000
Total Use of Funds:

  Working Capital February, March, April                               $ 750,000

  Total Use of Funds                                                   $ 750,000
                                                                      ==========

<PAGE>


                                 Schedule 9.1(a)

                    Location and Identification of Simulators



Each  simulator  is  identified  by location of the  simulator  as well as the
"number and car  sponsor" and of the "race car" which the simulator is intended
to resemble.



14 Simulators at Concord Mill Mall, Concord, NC

Landlord: Mills Corporation

Space Designated as

Serial Numbers and car number/sponsor graphic as follows:

Serial Number              Car Number/Sponsor

990365                     20 Home Depot

990367                     12 Alltel

990363                     38 M&M

990576                     97 Sharpie

990577                     43 Cheerios

990366                     88 UPS

990569                     18 Interstate

990568                     1 Army

990570                     45 Sprint

990571                     6 Viagra

990364                     8 Bud

990572                     43 RPDE

990575                     17 Dewalt

990573                     9 Dodge



1 Simulator at Cowboy Pizza, Monterey, CA

Revenue Share operator: Cannary Row Entertainment, Inc.

Serial Number and car number/sponsor graphic as follows:

Serial Number              Car Number/Sponsor

990578                     17 Dewalt


<PAGE>

[Form of Note]


         THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,
AS AMENDED  (THE  "ACT"),  OR THE SECURITIES  LAWS OF ANY STATE AND MAY NOT BE
SOLD,  TRANSFERRED  OR  OTHERWISE  DISPOSED  OF IN THE  ABSENCE  OF AN
EFFECTIVE  REGISTRATION  STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER
THE ACT, THE RULES AND REGULATIONS THEREUNDER  AND APPLICABLE  STATE LAWS.  THE
TRANSFER OF THIS NOTE IS SUBJECT TO THE  CONDITIONS  AND  RESTRICTIONS
SPECIFIED IN THE NOTE  PURCHASE AND SECURITY  AGREEMENT  DATED AS OF MARCH 7,
2003 BY AND AMONG THE COMPANY AND THE PURCHASERS  PARTY THERETO.  EACH HOLDER
HEREOF BY VIRTUE OF HOLDING THIS NOTE,  SHALL COMPLY WITH, AND BE DEEMED TO
HAVE AGREED TO COMPLY WITH SUCH CONDITIONS AND RESTRICTIONS.


                               PERFECT LINE, INC.

                        Secured Note Due February 2, 2004

No. [_______]                                           Issued: February 2, 2004
                                                       Matures: February 2, 2005


         For Value Received,  the undersigned,  Perfect Line, Inc., an Indiana
corporation (the "Company"),  hereby promises to pay to  _______________________
(the  "Holder")  or  assigns,  the principal sum of  ___________________________
Dollars of the United States of America on February 2, 2004  (minus any  portion
of such  principal  amount  prepaid  prior to such  date),  together  with
interest on the unpaid  principal  balance  existing  from time to time prior to
maturity at a per month rate equal to One Eighth of One  Percent  (0.8%),
together  with  reasonable  attorneys'  fees and other  costs  incurred  in
collecting or enforcing  payment  hereof and without  relief from  valuation
and  appraisement  laws.  Capitalized terms used but not defined herein have the
respective  meanings given to such terms in the Note Purchase  Agreement
referenced below.

         Such  interest  shall be paid on actual daily  balances of  outstanding
principal for the exact number of days such principal  remains  outstanding  and
shall be computed on the basis of a thirty (30) day month unless the month has
thirty-one (31) days in which case it will be computed on the basis of a thirty-
one day month.

         Principal and interest under this Note shall be due and payable as
follows:

         1.       Interest on the unpaid  principal  balance under this Note
shall be due and payable in arrears on the first business day of each month,
commencing February 1, 2004; and

         2.       the entire  unpaid  balance of principal  and all accrued and
unpaid  interest,  shall be due and payable on February 2, 2005.

         If any  installment  of  principal  or interest  under this Note is
payable on a day other than a business day, the maturity of such  installment
shall be extended to the next  succeeding  business day, but interest shall
be payable during such extension of maturity.

         Maker may not prepay  the  principal  amount of this Note for a period
of six (6) months  from the date of issuance.  Following such  non-prepayment
period,  the Company may, at its option,  prepay the principal amount of the
Notes,  in whole or in part,  at any time and from time to time,  provided that
the Company shall pay a premium of one percent (1.0%) of any principal amount
that is prepaid.

         Payments of principal,  interest and premium (if  applicable)  on this
Note are to be made in lawful money of the United States of America at ________,
or such other place as the Holder may designate in writing.

         This Note is one of the Notes (the "Notes") issued  pursuant to the
Note Purchase and Security  Agreement, dated as of February 2, 2004 (as from
time to time amended, the "Note Purchase  Agreement"),  among the Company and

<PAGE>

the several  Purchasers  named  therein and is entitled to the benefits  thereof
including the grant of a security interest in certain  assets of the Company
pursuant to Article 9 of the Note  Purchase  Agreement.  Each holder of this
Note will be deemed, by its acceptance  hereof, to have made the representations
and agreements set forth in Section 5.2 and 5.4 of the Note Purchase Agreement.

         If an Event of  Default,  as defined  in the Note  Purchase  Agreement,
occurs  and is  continuing,  the principal  of this Note may be declared  or
otherwise  become due and  payable in the manner,  and with the effect
provided in the Note Purchase Agreement.

         The Company and all endorsers,  guarantors,  sureties,  accommodation
parties hereof and all other parties liable or to become  liable for all or any
part of this  indebtedness,  severally  waive  presentment  for payment,
notice of dishonor,  protest,  notice of protest,  and notice of nonpayment of
this Note and expressly  agree that this Note and any payment  coming due under
it may be extended or otherwise  modified  from time to time without in any way
affecting their liability hereunder.

         Notice of acceptance of this Note is hereby waived.

         This Note and the Note Purchase  Agreement and all issues  hereunder
and  thereunder  shall be governed by and construed in accordance with the
internal laws of the State of Indiana


                                  Perfect Line, Inc.


                                  By : ___________________________
                                       William R. Donaldson
                                       Chairman and Chief Executive Officer



         For good and  valuable  consideration  received,  and in  consideration
of all loans,  advances  or other financial  accommodations  made or afforded to
Perfect Line, Inc. by the holder of this Note pursuant to this Note and the Note
Purchase  Agreement  (collectively,  the "Obligations"), the undersigned  hereby
absolutely  and unconditionally  guarantees the full and prompt payment and
performance of the  Obligations  when due,  whether by acceleration or
otherwise.



                                 Interactive Motorsports and Entertainment Corp.



                                 By:
                                    William R. Donaldson
                                    Chairman and Chief Executive Officer